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Curious Cat Kivans

Investing and Economics Blog

The 12 stock for 10 years portfolio consists of stocks I would be comfortable putting into an IRA for 10 years. The main criteria is for companies with a history of large positive cash flow, that seemed likely to continue that trend.

The current Marketocracy* calculated annualized rate or return (which excludes Tesco) is 7.6% (the S&P 500 annualized return for the period is 4.8%). Marketocracy subtracts the equivalent of 2% of assets annually to simulate management fees – as though the portfolio were a mutual fund – so without that (it is not like this portfolio takes much management), the return beats the S&P 500 annual return by about 4.8% annually (it would be a bit less with Tesco, but still over 4%).

In the last 6 months, I sold a portion of the Amazon position (the price seems quit rich for the stock and the portion of the portfolio it represented has increase due to the large gain) and I bought some additional Toyota (due to a good price and to increase the portion of the fund Toyota represented). In the last 6 months Toyota and Danaher have done particularly well.

I am also still worried about the price of Apple. But the future prospects seem to justify this price to me. I could lighten of sell this position, if I find something I like better. Emerging markets are volatile (and showing it recently) but from a long term perspective I think the returns will be rewarding and am not concerned about the Templeton emerging market funds held in the portfolio. They will likely suffer large declines at various periods, but I expect large gains to more than make up for the declines.

In order to comply with the marketocracy diversification rules and deal with not being able to buy Tesco (in marketocracy) I own fairly small amounts of several other stocks in the portfolio (that are included in the marketocracy return) – as well as some cash (about 5%): Target (TGT), Costco (COST), Car Max (KMX), ATP Oil and Gas (ATPG) and USG.

* In order to track performance created a marketocracy portfolio but had to make some minor adjustments (and marketocracy doesn’t allow Tesco to be purchased, though it is easily available as an ADR to anyone in the USA to buy in real life – it is based in England).
** Tesco had a purchase price of $22.55 on Dec 11th 2006 and has paid approximately 40 cents a year in dividends. The current price is $20.35. The -2% return is just an estimate.